International Boundary and Water Commission: Two Alternatives for
Improving Wastewater Treatment at the United States-Mexico Border
(24-APR-08, GAO-08-595R).					 
                                                                 
For many years, untreated wastewater originating in Tijuana,	 
Mexico, has entered the United States, largely via the Tijuana	 
River. Tijuana's sewage system does not have the capacity to	 
treat all of the city's wastewater, and some areas of the city	 
are not connected to the sewer system. Tijuana's higher elevation
results in sewage flowing downhill into California and out to the
Pacific Ocean, causing beach closures in southern California. In 
the 1990s, the U.S. and Mexican Sections of the International	 
Boundary and Water Commission collaborated with the U.S.	 
Environmental Protection Agency (EPA) to address the problem by  
constructing the South Bay International Wastewater Treatment	 
Plant (SBIWTP) in San Ysidro, California. The SBIWTP began	 
providing the first level of treatment, known as primary	 
treatment, to 25 million gallons per day (mgd) of Mexican	 
wastewater in 1997. However, the part of the facility that would 
have provided secondary treatment, allowing the wastewater to	 
meet Clean Water Act (CWA) standards for discharge into the	 
Pacific Ocean, was not constructed due to a lack of funding and  
legal challenges. As a result, water discharged from the SBIWTP  
is only partially treated and has never complied with the	 
requirements of the CWA. Over more than a decade, the U.S.	 
Section of the International Boundary and Water Commission	 
(USIBWC) has considered a variety of alternatives to bring the	 
wastewater into CWA compliance, and now faces a federal court	 
order requiring it to achieve CWA compliance by September 30,	 
2008. The USIBWC is currently considering two proposals: (1)	 
upgrading the SBIWTP to provide secondary treatment at the	 
existing plant site, or (2) building a new plant in Mexico where 
wastewater that received primary treatment at the SBIWTP would be
pumped for secondary treatment, as proposed by Bajagua, LLC.	 
Under both proposals, the treated effluent would be pumped into  
U.S. waters of the Pacific Ocean through a pipeline known as the 
South Bay Ocean Outfall, a facility used by both the USIBWC and  
the City of San Diego. In response to an explanatory statement of
the House Appropriations Committee that accompanied the 2008	 
Consolidated Appropriations Act, GAO (1) described the two	 
proposed treatment alternatives, (2) described the estimated	 
costs and timelines for each proposal, and (3) assessed the	 
reliability of these estimates. The explanatory statement	 
directed GAO to report to the Appropriations Committees within	 
120 days of enactment of the law, which occurred on December 26, 
2007. On April 7, 2008, GAO briefed members of Congressional	 
staffs on our findings. This letter summarizes the main points	 
from our presentation.						 
-------------------------Indexing Terms------------------------- 
REPORTNUM:   GAO-08-595R					        
    ACCNO:   A81869						        
  TITLE:     International Boundary and Water Commission: Two	      
Alternatives for Improving Wastewater Treatment at the United	 
States-Mexico Border						 
     DATE:   04/24/2008 
  SUBJECT:   Cost analysis					 
	     Cost effectiveness analysis			 
	     Environmental monitoring				 
	     Evaluation criteria				 
	     Facility construction				 
	     Financial analysis 				 
	     Groundwater contamination				 
	     Program evaluation 				 
	     Risk assessment					 
	     Risk factors					 
	     Risk management					 
	     Sewage treatment					 
	     Standards						 
	     Strategic planning 				 
	     Wastewater 					 
	     Wastewater management				 
	     Wastewater treatment				 
	     Wastewater treatment plants			 
	     Water pollution					 
	     Water pollution control				 
	     Water quality					 
	     Water quality standards				 
	     Water treatment					 
	     Program goals or objectives			 
	     Program implementation				 
	     Mexico						 

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GAO-08-595R

   

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GAO-08-595R: 

Washington, DC 20548:
United States Government Accountability Office: 

April 24, 2008: 

Congressional Requesters: 

Subject: International Boundary and Water Commission: Two Alternatives 
for Improving Wastewater Treatment at the United States-Mexico Border: 

For many years, untreated wastewater originating in Tijuana, Mexico, 
has entered the United States, largely via the Tijuana River. Tijuana's 
sewage system does not have the capacity to treat all of the city's 
wastewater, and some areas of the city are not connected to the sewer 
system. Tijuana's higher elevation results in sewage flowing downhill 
into California and out to the Pacific Ocean, causing beach closures in 
southern California. In the 1990s, the U.S. and Mexican Sections of the 
International Boundary and Water Commission collaborated with the U.S. 
Environmental Protection Agency (EPA) to address the problem by 
constructing the South Bay International Wastewater Treatment Plant 
(SBIWTP) in San Ysidro, California.[Footnote 1] The SBIWTP began 
providing the first level of treatment, known as primary treatment, to 
25 million gallons per day (mgd) of Mexican wastewater in 1997. 
However, the part of the facility that would have provided secondary 
treatment, allowing the wastewater to meet Clean Water Act (CWA) 
standards for discharge into the Pacific Ocean, was not constructed due 
to a lack of funding and legal challenges. As a result, water 
discharged from the SBIWTP is only partially treated and has never 
complied with the requirements of the CWA. 

Over more than a decade, the U.S. Section of the International Boundary 
and Water Commission (USIBWC) has considered a variety of alternatives 
to bring the wastewater into CWA compliance, and now faces a federal 
court order requiring it to achieve CWA compliance by September 30, 
2008. The USIBWC is currently considering two proposals: (1) upgrading 
the SBIWTP to provide secondary treatment at the existing plant site, 
or (2) building a new plant in Mexico where wastewater that received 
primary treatment at the SBIWTP would be pumped for secondary 
treatment, as proposed by Bajagua, LLC.[Footnote 2] Under both 
proposals, the treated effluent would be pumped into U.S. waters of the 
Pacific Ocean through a pipeline known as the South Bay Ocean Outfall, 
a facility used by both the USIBWC and the City of San Diego. (See 
enclosure II for additional discussion of the context for this issue, a 
timeline of significant events in the multiyear effort to address the 
environmental problems of Mexican wastewater affecting California, a 
map showing the location of wastewater treatment facilities in the 
region, and a diagram of the wastewater flows from the proposed 
facilities.) 

In response to an explanatory statement of the House Appropriations 
Committee that accompanied the 2008 Consolidated Appropriations Act, 
GAO (1) described the two proposed treatment alternatives, (2) 
described the estimated costs and timelines for each proposal, and (3) 
assessed the reliability of these estimates. The explanatory statement 
directed GAO to report to the Appropriations Committees within 120 days 
of enactment of the law, which occurred on December 26, 2007. On April 
7, 2008, we briefed members of your staffs on our findings. This letter 
summarizes the main points from our presentation. See enclosure III for 
a copy of the briefing slides from that presentation. 

To conduct this work, we obtained project descriptions and estimated 
costs and timelines from the USIBWC for the proposed SBIWTP upgrade and 
Bajagua, LLC for the proposed plant in Mexico. We interviewed 
representatives of the USIBWC and Bajagua, LLC regarding their 
estimates, and other stakeholders such as the Commissioner of the 
Mexican Section of the International Boundary and Water Commission, EPA 
staff, and staff of the California State and San Diego Regional Water 
Quality Control Boards. We visited the SBIWTP in San Ysidro, 
California, existing and under-construction wastewater treatment plants 
in Tijuana, and the proposed site for the Bajagua plant. We analyzed 
the reliability of the cost and timeline estimates using GAO's Cost 
Assessment Guide.[Footnote 3] 

Our work is subject to three key limitations. First, the USIBWC and 
Bajagua, LLC did not provide complete cost and timeline estimates until 
the latter half of March, limiting the time available for assessing 
their reliability. Second, due to time constraints, we did not 
independently verify the cost or timeline information that was provided 
to us. Third, we limited our review to the objectives discussed with 
the staffs of the House and Senate Appropriations Committees and as 
such did not address a variety of issues, such as (1) independently 
assessing Tijuana's current or future wastewater treatment needs or the 
extent to which each proposal addresses those needs; (2) assessing 
whether Bajagua, LLC could develop the capacity to reclaim and sell 
water from its proposed plant and whether such sales would reduce costs 
to the federal government; (3) assessing the extent to which untreated 
or undertreated sewage from Mexico affects southern California, how 
these impacts vary between wet and dry periods, and the extent to which 
each project would address these impacts; or (4) assessing the extent 
to which the USIBWC managed previous projects within its estimated 
costs and timeframes. 

We conducted this performance audit work from January 2008 through 
April 2008 in accordance with generally accepted government auditing 
standards. Those standards require that we plan and perform the audit 
to obtain sufficient, appropriate evidence to provide a reasonable 
basis for our findings and conclusions based on our audit objectives. 
We believe that the evidence obtained provides a reasonable basis for 
our findings and conclusions based on our audit objectives. For 
additional information on our scope and methodology, see enclosure I. 

Summary of Findings: 

Although both proposals are designed to enable the USIBWC to meet CWA 
requirements, they take different approaches in doing so. 

* The USIBWC's proposal would expand the SBIWTP to allow it to provide 
secondary treatment to the 25 mgd of wastewater already receiving 
primary treatment at the plant, bringing it to CWA standards. According 
to the USIBWC, construction would follow a final design which will be 
provided by an engineering consulting firm in June 2008, based on its 
update of the original SBIWTP design. U.S. appropriations would pay for 
the expansion's construction and operations and maintenance (O&M) 
costs. 

* Under the Bajagua, LLC proposal, Bajagua, LLC would contract with 
another company to design, build, and operate a new facility in Mexico 
that would provide secondary treatment to 25 mgd of wastewater that 
would be pumped to the plant after receiving primary treatment at the 
SBIWTP, bringing it to CWA standards. The Bajagua plant would also have 
the capacity to provide primary and secondary treatment of up to an 
additional 34 mgd of wastewater from Tijuana. However, because 
estimates of Tijuana's future wastewater treatment needs vary, it is 
unclear when this additional capacity will be needed. Bajagua, LLC does 
not currently have a detailed design for its plant because it plans to 
hire a contractor to develop one. Bajagua, LLC would fully finance the 
initial construction of the new plant, and U.S. appropriations for 
wastewater treatment services over 20 years would enable Bajagua, LLC 
to recover the costs of construction and O&M, as well as equity and 
debt service, management fees, and profits. After 20 years, the 
ownership of the plant would transfer to the responsible Mexican 
authorities. 

According to data from the USIBWC and Bajagua, LLC for their respective 
proposals, the estimated costs for the SBIWTP upgrade are lower than 
the costs for the Bajagua plant, but Bajagua, LLC projects that its 
plant will be completed about 10 months sooner than the SBIWTP upgrade. 
However, neither proposal will enable the USIBWC to comply with the 
current court-ordered deadline; specifically: 

* The USIBWC estimates that expanding the SBIWTP will cost $101.5 
million in construction costs, and that total O&M costs for both 
primary and secondary treatment facilities during the first year of 
operations will cost about $16.7 million. The cost to the U.S. federal 
government would be about $331 million for construction and operation 
over a 20-year term in 2008 dollars when adjusted for present value. 
The USIBWC projects that the expanded SBIWTP would be operational by 
January 2011. 

* Bajagua, LLC estimates that building a new facility in Mexico will 
cost $195.6 million, which it will finance. Wastewater treatment 
services, including recovery of construction costs, O&M costs (which 
include primary treatment at the SBIWTP), equity and debt service, 
management fees, and profit, will cost the U.S. federal government 
$33.8 million during the first year of operation. Over 20 years, the 
cost to the federal government would be about $539 million in 2008 
dollars when adjusted for present value. Bajagua, LLC projects that the 
new plant would be operational by March 2010. 

Neither projects' estimates of costs and timelines fully meets GAO's 
criteria for reliability, but the estimated costs and timelines for the 
SBIWTP upgrade may be somewhat more reliable than those for the 
Bajagua, LLC proposal. GAO considers a cost estimate reliable if it 
follows certain best practices--is well documented, comprehensive, 
accurate, and credible. The SBIWTP upgrade and the Bajagua plant cost 
estimates both met some of our criteria for being well documented, 
comprehensive, and accurate, but overall, the SBIWTP upgrade estimate 
met more of these criteria than the Bajagua plant estimate. For 
example: 

* The SBIWTP upgrade cost estimate was based on a final design that is 
in the process of being updated and revised, with cost estimates for 
detailed project elements rolled up to a total cost of construction, 
with significant participation and review by USIBWC and SBIWTP 
technical staff. 

* The Bajagua plant cost estimate met some of the criteria for each 
best practice, but as a preliminary design, did not include the same 
level of detailed, comprehensive descriptions of project elements and 
costs, or as clearly explain the sources of data and methodologies used 
in developing the estimate. 

* Both cost estimates met little or none of GAO's criteria for 
credibility, because neither had been independently reviewed and 
verified, varied the assumptions to assess sensitivity to changes, or 
conducted risk or uncertainty analysis to determine the extent to which 
actual costs may vary from the estimate. 

Regarding project timelines, we found that neither project fully met 
GAO's best practices for scheduling. While it is early in the 
development stage for both projects, a schedule risk analysis--using 
statistical techniques to predict the level of confidence in meeting a 
program's completion date--would be useful in assessing the reliability 
of the timeline estimates. In the absence of such an analysis, we 
identified some of the potential risks facing each project that would 
typically be part of the analysis. We found that the Bajagua, LLC 
project includes more unresolved issues than the SBIWTP upgrade, such 
as the need to obtain over 30 permits, approvals, and concessions from 
both U.S. and Mexican authorities; the need to resolve significant 
issues in its draft fee-for-services agreement with the USIBWC; and 
other legal and technical issues which could delay its schedule. 

Agency and Other Interested Party Comments and Our Evaluation: 

We provided a copy of our draft report to the USIBWC and Bajagua, LLC 
for their review and comment. The USIBWC's and Bajagua, LLC's comments 
and our detailed responses are presented in enclosures IV and V. 

In its written response, the USIBWC said that it generally agreed with 
our findings and conclusions given the limited scope and timeframe for 
the review of the two alternatives. The USIBWC also provided technical 
comments, which we incorporated into the report as appropriate. 

In its written response, Bajagua, LLC, commented on several aspects of 
our draft report, including four main areas of concern. 

* Bajagua, LLC said it believed that any comparison of its project with 
the upgrade of the SBIWTP should conclude that its project is the more 
timely and cost-effective alternative. We did not assess either 
project's benefits or make conclusions about which project would be 
more timely or cost-effective. We limited our work to the objectives 
discussed with the staff of the House and Senate Appropriations 
Committees. Specifically, we assessed the reliability of the cost and 
timeline estimates provided by the USIBWC and Bajagua, LLC against the 
criteria contained in our Cost Assessment Guide. 

* Bajagua, LLC disagreed with our finding that its project has more 
unresolved issues than the SBIWTP upgrade and stated that our analysis 
was not supported by the facts. We believe our analysis was correct. 
Our draft report (now in enclosure III, pages 48-51) noted several 
areas where key issues remain unresolved, including obtaining necessary 
permits, negotiating a fee-for-services agreement, and resolving 
outstanding legal issues. Bajagua, LLC's response provided no 
additional information to show resolution of these issues. As such, we 
believe it is appropriate to continue to characterize these issues as 
unresolved and therefore as uncertainties that could delay the Bajagua 
project's timeline. 

* Bajagua, LLC also listed five issues regarding the SBIWTP upgrade 
that it believes we did not consider in our draft report, including how 
the two proposals could affect beach pollution in California, and the 
USIBWC's track record managing past projects. We agree that we did not 
address these two issues since they were not part of our scope, as 
noted in our draft report (now on page 2). The third issue involves the 
potential for legal action against the SBIWTP, which we addressed in 
our draft report (now in enclosure III, page 47). Finally, Bajagua, LLC 
raised two legal and regulatory issues that do not appear to be 
factually accurate. Specifically, it said upgrading the SBIWTP could 
conflict with guidance from the U.S. Environmental Protection Agency 
(EPA) because Tijuana lacks a pretreatment program for its industrial 
wastewater. However, according to an EPA official, no such EPA guidance 
exists and an industrial pretreatment program has been in place in 
Tijuana since 2001. Bajagua, LLC also said the USIBWC's estimated 
timeframes did not include the time needed to obtain approval from the 
California Coastal Commission. However, according to a Commission 
official, the Commission has already granted approval for the SBIWTP to 
provide secondary treatment. 

* Finally, Bajagua, LLC expressed the view that we should continue with 
a comprehensive review of the two alternatives, including the potential 
benefits of the Bajagua project. Bajagua, LLC stated that the 
explanatory statement calling for this report also requires us to 
conduct a separate, comprehensive assessment of the two alternatives. 
While the explanatory statement does make reference to a separate on- 
going comprehensive GAO review, we did not have such a review on-going. 
We would consider conducting further work related to wastewater 
treatment issues in the Tijuana River basin if we received a 
Congressional request or mandate to do so. 

Bajagua, LLC also provided GAO with technical comments, which we 
incorporated into our report as appropriate. 

We are sending copies of this report to the Commissioner of the USIBWC; 
Bajagua, LLC; appropriate congressional committees; other interested 
Members of Congress; and other interested parties. We will also make 
copies available to others upon request. In addition, the report will 
be available at no charge on the GAO Web site at [hyperlink, 
http://www.gao.gov]. 

If you or your staffs have any questions about this report, please 
contact me at 202-512-3841 or [email protected]. Contact points for our 
Offices of Congressional Relations and Public Affairs may be found on 
the last page of this report. Major contributors to this report were 
Stephen D. Secrist, Assistant Director; Allen Chan; Brad Dobbins; 
Terrell Dorn; Richard Johnson; Alison O'Neill; Karen Richey; Anne 
Stevens; and Heather Whitehead. 

Signed by: 

David C. Maurer:
Acting Director, Natural Resources and Environment: 

Enclosures: 

Congressional Addressees: 

The Honorable Patrick J. Leahy:
Chairman:
The Honorable Judd Gregg:
Ranking Member:
Subcommittee on State, Foreign Operations, and Related Programs:
Committee on Appropriations:
United States Senate: 

The Honorable Nita M. Lowey:
Chairwoman:
The Honorable Frank R. Wolf:
Ranking Member:
Subcommittee on State, Foreign Operations, and Related Programs:
Committee on Appropriations:
House of Representatives: 

The Honorable Dianne Feinstein:
United States Senate: 

The Honorable Bob Filner:
House of Representatives: 

The Honorable Duncan L. Hunter:
House of Representatives: 

[End of correspondence] 

Enclosure 1: Scope and Methodology: 

To conduct this work, we obtained project descriptions, cost estimates, 
and completion timeline estimates from the U.S. Section of the 
International Boundary and Water Commission (USIBWC) for the proposed 
South Bay International Wastewater Treatment Plant (SBIWTP) upgrade and 
Bajagua, LLC for the proposed plant in Mexico. We interviewed 
representatives of the USIBWC and Bajagua, LLC regarding their 
estimates, and other stakeholders such as the Commissioner of the 
Mexican Section of the International Boundary and Water Commission, 
U.S. Environmental Protection Agency (EPA) staff and staff of the 
California State and San Diego Regional Water Quality Control Boards. 
We visited the SBIWTP in San Ysidro, California, existing and under- 
construction wastewater treatment plants in Tijuana, and the proposed 
site for the Bajagua plant. 

We conducted our analysis of the cost and timeline estimates using 
GAO's Cost Assessment Guide.[Footnote 4] The guide identifies best 
practices that should be followed to achieve the four characteristics 
of a high-quality, reliable cost estimate: 

1. Well Documented. An estimate is thoroughly documented, including 
source data and significance, clearly detailed calculations and 
results, and explanations of why particular methods and references were 
chosen. Data can be traced to their source documents. 

2. Comprehensive. An estimate has enough detail to ensure that cost 
elements are neither omitted nor double counted. All cost-influencing 
ground rules and assumptions are detailed in the estimate's 
documentation. 

3. Accurate. An estimate is unbiased, not overly conservative or overly 
optimistic, and is based on an assessment of most likely costs. Few, if 
any, mathematical mistakes are present and those that are present are 
minor. 

4. Credible. Any limitations of the analysis because of uncertainty or 
bias surrounding data or assumptions are discussed. Major assumptions 
are varied and other outcomes are recomputed to determine how sensitive 
they are to changes in the assumptions. Risk and uncertainty analyses 
are performed to determine the level of risk associated with the 
estimate. The estimate's results are cross-checked, and an independent 
cost estimate is developed to determine whether other estimating 
methods produce similar results. 

The Guide also identifies best practices for conducting reliable 
project timeline estimates. A project timeline estimate is considered 
reliable if (1) all activities are defined; (2) all activities are 
sequenced; (3) the duration for each activity is estimated; (4) 
resources such as labor, materials, and overhead are assigned to all 
activities; (5) a critical path is identified for all activities; (6) 
float time--the amount of time a task can slip before affecting the 
critical path--between activities is identified; (7) schedule risk 
analysis is conducted using statistical methods to determine the amount 
of time to reserve for contingencies; and (8) the schedule is 
horizontally integrated (depicts relationships between different 
program tasks and resources needed for different tasks) and vertically 
integrated (traces the consistency of data between master-, 
intermediate-, and detailed-level tasks in the schedule). 

Our work is subject to three key limitations. First, we did not receive 
current and complete cost and timeline estimates until the latter half 
of March, limiting the time available for assessing their reliability. 
Second, we did not independently verify the cost or timeline 
information that was provided to us. Third, we limited our review to 
the objectives discussed with the staff of the House and Senate 
Appropriations Committees and as such did not address a variety of 
issues, such as (1) independently assessing Tijuana's current or future 
wastewater treatment needs or the extent to which each proposal 
addresses those needs; (2) assessing whether Bajagua, LLC could develop 
the capacity to reclaim and sell water from its proposed plant and 
whether such sales would reduce costs to the federal government; (3) 
assessing the extent to which untreated or undertreated sewage from 
Mexico affects southern California, how these impacts vary between wet 
and dry periods, and the extent to which each project would address 
these impacts; or (4) assessing the extent to which the USIBWC managed 
previous projects within their estimated costs and timeframes. 

We conducted this performance audit work from January 2008 through 
April 2008 in accordance with generally accepted government auditing 
standards. Those standards require that we plan and perform the audit 
to obtain sufficient, appropriate evidence to provide a reasonable 
basis for our findings and conclusions based on our audit objectives. 
We believe that the evidence obtained provides a reasonable basis for 
our findings and conclusions based on our audit objectives. 

[End of Enclosure I] 

Enclosure II: Background and Timeline of Major Events in the Effort to 
Address Wastewater Problems along the California-Mexico Border: 

Wastewater from Mexico has historically flowed into the United States 
from Tijuana, polluting the Tijuana River estuary and, subsequently, 
the beaches south of San Diego. The Clean Water Act (CWA) generally 
prohibits the discharge of pollutants into waters of the United States 
without a National Pollutant Discharge Elimination System (NPDES) 
permit.[Footnote 5] California implements the CWA through its own water 
quality legislation known as the Porter-Cologne Act. Pursuant to these 
acts, the San Diego Regional Water Quality Control Board issues permits 
to discharging facilities in the San Diego area, including the SBIWTP. 
To meet CWA standards, wastewater discharged from the SBIWTP must 
undergo primary and secondary treatment. 

According to the USIBWC, from 1991 to 1994, Congress appropriated 
$239.4 million to the EPA for (1) a wastewater treatment facility that 
would provide both primary and secondary treatment capacity, (2) a 
facility called the South Bay Ocean Outfall (SBOO) to carry the treated 
effluent from the plant out into the Pacific Ocean for disposal, and 
(3) related facilities.[Footnote 6] The EPA distributed these funds to 
the USIBWC to plan, design, and construct the SBIWTP; to the City of 
San Diego to construct the SBOO; and to the U.S. Army Corps of 
Engineers to provide planning and environmental review assistance. 
EPA's appropriations act for fiscal year 1993 capped funding for this 
project at $239.4 million.[Footnote 7] 

A primary treatment facility and related infrastructure was constructed 
for about $133 million, the SBOO was constructed for about $90 million, 
and the SBIWTP began operating in 1997. However, the part of the SBIWTP 
that would have provided secondary treatment was never constructed 
because nearly all of the appropriated funds had been spent on 
constructing the other facilities. As a result, effluent that does not 
comply with CWA standards continues to flow into the U.S. waters of the 
Pacific Ocean, and the SBIWTP has never been in compliance with the 
terms of its NPDES permit. Figure 1 shows the location of the SBIWTP 
and other existing and proposed wastewater treatment facilities in the 
Tijuana border region. 

Figure 1: Location of Existing and Proposed Border Wastewater Treatment 
Facilities: 

[See PDF for image] 

This figure is a map of the location of existing and proposed border 
wastewater treatment facilities. The following items are specifically 
depicted on the map: 
* Proposed Bajagua pipelines (delivery and return); 
* South Bay International Wastewater Treatment Plant (WTP) site and 
proposed Bajagua pump station; 
* San Antonia de los Buenos Wastewater Treatment Plant; 
* La Morita WTP under construction; 
* Monte de los Olivos WTP under construction; 
* Proposed Bajagua WTP site; 
* Existing pipeline and South Bay Ocean Outfall. 

Source: GAO analysis of data provided by U.S. Section, IBWC, and 
Bajagua, LLC. 

[End of figure] 

Over the years, the USIBWC has considered several options for bringing 
the SBIWTP into compliance with the CWA. Under the National 
Environmental Policy Act of 1969 (NEPA), agencies evaluate the likely 
environmental effects of projects they are proposing using an 
environmental assessment (EA) or, if the projects likely would 
significantly affect the environment, a more detailed environmental 
impact statement (EIS). Over the past 14 years, the USIBWC prepared 
three separate EISs--in 1994, 1999, and 2005--considering different 
alternatives for achieving CWA compliance at the SBIWTP. 

In 1994, as part of the original SBIWTP design process, the USIBWC and 
EPA evaluated various options for secondary treatment and concluded 
that activated sludge treatment--using aerobic micro-organisms to 
produce disposable wastewater and residual solids--was its preferred 
option for meeting CWA effluent standards. However, the infrastructure 
needed to provide this treatment was never constructed in part because 
the adequacy of the NEPA analysis for the 1994 decision was challenged 
in court. The USIBWC and EPA resolved the litigation by agreeing to re- 
examine the secondary treatment alternatives. In 1999, the USIBWC and 
EPA again reviewed its options and concluded that aerated pond 
treatment was its preferred alternative for secondary treatment because 
the USIBWC believed this was the most timely and cost-effective 
option.[Footnote 8] However, Congress declined the USIBWC's and EPA's 
requests for funding and, in November 2000, passed the Tijuana River 
Valley Estuary and Beach Sewage Cleanup Act, authorizing the secondary 
treatment of wastewater from the SBIWTP at a new facility to be built 
in Mexico.[Footnote 9] The Act authorized the USIBWC to enter into a 
multiyear fee-for-services contract with the owner of the Mexican 
facility and to negotiate a new treaty minute to implement the Act's 
provisions. The Act's provisions closely paralleled the proposal of a 
private company, Bajagua, LLC, to carry out secondary treatment in 
Mexico under a fee-for-services agreement. 

In 2001, the Regional Water Quality Control Board of San Diego sued the 
USIBWC seeking to compel it to begin complying with the CWA, the Porter-
Cologne Act, and the terms of the NPDES permit. In December 2004, the 
U.S. District Court for the Southern District of California issued an 
order that established milestones to lead the USIBWC to comply with the 
CWA by September 30, 2008. 

In February 2004, the United States and Mexico Sections of the IBWC 
agreed to a new international agreement known as a treaty minute, 
Minute 311, to implement the Tijuana River Act. Under Minute 311, the 
commission could enter into an "operating lease contract" with Bajagua, 
LLC as the service provider of the Mexican facility. Minute 311 
provided that the arrangement would be subject to the approval of the 
U.S. and Mexican governments in a subsequent treaty minute.[Footnote 
10] 

In 2005, the USIBWC once more evaluated its options and concluded that 
funding was not available at that time to construct a secondary 
treatment option at the U.S. facility. Therefore its preferred option 
was to pump wastewater that had undergone primary treatment at the 
SBIWTP to a plant to be built in Mexico, where it would receive 
secondary treatment using an extended aeration process. The plant would 
be built and operated by Bajagua, LLC and paid for by a fee-for- 
services agreement. According to a 2005 document explaining the 
USIBWC's decision, Bajagua, LLC was chosen in part because the USIBWC 
believed that Bajagua, LLC could meet the deadlines in the court order 
and because funding was not available at that time to upgrade the U.S. 
facility. However, the USIBWC suspended its development agreement with 
Bajagua, LLC on May 8, 2007, after Bajagua, LLC informed the USIBWC 
that it would not be able to meet the court-ordered deadline.[Footnote 
11] The 2008 Consolidated Appropriations Act, signed by the President 
on December 26, 2007, included language requiring the USIBWC to resume 
negotiations with Bajagua, LLC and to prepare plans to upgrade the 
SBIWTP. Consequently, the USIBWC is currently considering two 
proposals: (1) upgrading the SBIWTP to provide secondary treatment at 
the existing plant site, or (2) building a new plant in Mexico and 
pumping wastewater that received primary treatment at the SBIWTP to the 
new plant for secondary treatment, as proposed by Bajagua, LLC. Figure 
2 shows the wastewater flows for the two proposals. 

Figure 2: Diagram of Wastewater Flows for the Alternative Proposals: 

[See PDF for image] 

This figure displays two maps containing diagrams of wastewater flows 
for the alternative proposals. The following items are indicated on 
each map: 

SBIWTP Upgrade Proposal: 
1) 25 mgd of untreated waste. 
2) SBIWTP: 25 mgd advanced primary treatment (existing). 
3) SBIWTP: 25 mgd secondary treatment (proposed). 
4) 25 mgd discharged outfall (existing). 

Bajagua Plant Proposal: 
1) 25 mgd of untreated waste. 
2) SBIWTP: 25 mgd advanced primary treatment (existing). 
3) 25 mgd primary treated water pumped uphill (proposed). 
4) Up to 34 mgd untreated Mexican waste (proposed). 
5) Bajagua WTP up to 59 mgd treated to secondary level (proposed). 
6) Up to 58 mgd secondary treated waste water flows downhill 
(proposed). 
7) Up to 59 mgd discharged to Outfall (existing). 

Source: GAO analysis of data provided by U.S. Section, IBWC, and 
Bajagua, LLC. 

[End of figure] 

[End of enclosure II] 

Enclosure III: Slides from April 7, 2008, Briefing to Congressional 
Staff: 

International Boundary and Water Commission: 

A Briefing for Congressional Requesters on Two Alternatives for 
Improving Wastewater Treatment at the United States-Mexico Border: 

April 7, 2008: 

The Problem: 

For many years untreated sewage flows entered the United States from 
Tijuana, Mexico, largely via the Tijuana River. Tijuanaï¿½s sewage system 
does not have the capacity to treat all of the cityï¿½s wastewater, and 
its higher elevation resulted in sewage flowing downhill into 
California. 

The untreated wastewater polluted the Tijuana River estuary and 
discharged into the Pacific Ocean, causing beach closures on the 
California coast south of San Diego. 

In the 1990s, the U.S. and Mexican Sections of the International 
Boundary and Water Commission and the U.S. Environmental Protection 
Agency (EPA) addressed the problem by building the South Bay 
International Wastewater Treatment Plant (SBIWTP) in San Ysidro, 
California. 

To meet Clean Water Act (CWA) standards, wastewater from the plant must 
receive primary and secondary treatment before it can be discharged. 

The SBIWTP began operations in 1997, providing advanced primary 
treatment to 25 million gallons per day (mgd) of wastewater from 
Tijuana. The part of the facility that was to provide secondary 
treatment was never constructed because of legal challenges and a lack 
of funding. 

As a result, water discharged from the SBIWTP via the South Bay Ocean 
Outfall (SBOO) into U.S. waters of the Pacific Ocean is only partially 
treated and has never met CWA standards. 

USIBWC Currently Is Considering Two Proposals: 

The U.S. Section of the International Boundary and Water Commission 
(USIBWC) has considered several options over the years to solve the 
problem, and is currently under a federal court order to comply with 
the CWA by September 30, 2008. 

The USIBWC is considering two alternatives: 

1. Upgrading the SBIWTP to provide secondary treatment at the existing 
plant site, or; 

2. Building a new plant in Tijuana, Mexico, and pumping wastewater from 
the SBIWTP to the new facility for secondary treatment, as proposed by 
Bajagua, LLC. 

Under both proposals, treated wastewater would be discharged into the 
ocean via the existing SBOO. 

Neither proposal addresses wastewater flows outside of the Tijuana 
sewage system. 

Figure 1: Location of Existing and Proposed Border Wastewater Treatment 
Facilities: 

[See PDF for image] 

This figure is a map of the location of existing and proposed border 
wastewater treatment facilities. The following items are specifically 
depicted on the map: 
* Proposed Bajagua pipelines (delivery and return); 
* South Bay International Wastewater Treatment Plant (WTP) site and 
proposed Bajagua pump station; 
* San Antonia de los Buenos Wastewater Treatment Plant; 
* La Morita WTP under construction; 
* Monte de los Olivos WTP under construction; 
* Proposed Bajagua WTP site; 
* Existing pipeline and South Bay Ocean Outfall. 

Source: GAO analysis of data provided by U.S. Section, IBWC, and 
Bajagua, LLC. 

[End of figure] 

Objectives: 

In response to an explanatory statement that accompanied the 2008 
Consolidated Appropriations Act, GAO: 

1. described the two proposed treatment alternatives; 

2. described the estimated costs and timelines for each proposal, and; 

3. assessed the reliability of the cost and timeline estimates. 

The explanatory statement directed GAO to report to the Appropriations 
Committees within 120 days of enactment of the law, which occurred on 
December 26, 2007. 

Scope and Methodology: 

To describe the proposals, their costs, and timelines, we: 

* obtained project descriptions and cost and completion timeline 
estimates from the USIBWC for the SBIWTP upgrade and Bajagua, LLC for 
the plant in Mexico; and; 

* interviewed representatives of the USIBWC, Bajagua, LLC, EPA, 
regional water quality control boards, and other stakeholders. 

We also visited the SBIWTP, existing and under-construction treatment 
plants in Tijuana, and the proposed site for the Bajagua plant. 

We conducted this performance audit from January 2008 to April 2008 in 
accordance with generally accepted government auditing standards. 

Limitations of GAOï¿½s Work: 

The USIBWC and Bajagua, LLC did not provide current and complete cost 
and timeline estimates until the latter half of March, limiting the 
time available for assessing their reliability. 

We did not independently verify these cost or timeline estimates. 

We limited our review to the objectives discussed with the staffs of 
the House and Senate Appropriations Committees. As a result, we did not 
assess a number of related issues, such as the potential benefits of 
the proposals. 

The Alternatives: In Summary: 

Both plants would address the current need to provide secondary 
treatment to 25 mgd of Mexican wastewater, but would do so with 
different contracting and funding approaches. 

The Bajagua, LLC proposal is more logistically complex due in part to 
the movement of wastewater back and forth across the border for primary 
and secondary treatment. 

The larger treatment capacity of the Bajagua plant could help address 
Tijuanaï¿½s future needs, but estimates vary regarding when this 
additional capacity may be needed. 

Table: The Alternatives: Three Key Differences In Approaches: 

Amount treated: 
SBIWTP Upgrade: Would provide secondary treatment for 25 mgd of 
wastewater; 
Bajagua Plant: Would provide secondary treatment for 25 mgd of 
wastewater and the capacity to treat up to 34 mgd of additional 
wastewater from Tijuana. 

Design, construction, and operation: 
SBIWTP Upgrade: USIBWC would request separate bids to (1) construct the 
upgrade based on USIBWCï¿½s final design and (2) operate the plant when 
completed; 
Bajagua Plant: Bajagua, LLC would enter into a fixed price contract 
with a single contractor to design, build, and operate (DBO contractor) 
the plant. 

Funding: 
SBIWTP Upgrade: U.S. appropriations would fund construction and 
operations and maintenance (O&M) costs; 
Bajagua Plant: Bajagua, LLC would finance cost of construction. U.S. 
appropriations would pay for wastewater treatment services over 20 
years enabling Bajagua, LLC to recover the cost of construction and pay 
for O&M costs, management fees, and profits. 

[End of table] 

The Alternatives: Differences in Wastewater Flows for Each Alternative: 

Figure 2: Diagram of Wastewater Flows for the Alternative Proposals: 

[See PDF for image] 

This figure displays two maps containing diagrams of wastewater flows 
for the alternative proposals. The following items are indicated on 
each map: 

SBIWTP Upgrade Proposal: 
1) 25 mgd of untreated waste. 
2) SBIWTP: 25 mgd advanced primary treatment (existing). 
3) SBIWTP: 25 mgd secondary treatment (proposed). 
4) 25 mgd discharged outfall (existing). 

Bajagua Plant Proposal: 
1) 25 mgd of untreated waste. 
2) SBIWTP: 25 mgd advanced primary treatment (existing). 
3) 25 mgd primary treated water pumped uphill (proposed). 
4) Up to 34 mgd untreated Mexican waste (proposed). 
5) Bajagua WTP up to 59 mgd treated to secondary level (proposed). 
6) Up to 58 mgd secondary treated waste water flows downhill 
(proposed). 
7) Up to 59 mgd discharged to Outfall (existing). 

Source: GAO analysis of data provided by U.S. Section, IBWC, and 
Bajagua, LLC. 

[End of figure] 

The Alternatives: Estimates Vary on When Bajaguaï¿½s Extra Capacity May 
Be Needed: 

A 2003 report by the State Commission of Public Services of Tijuana 
(CESPT) and EPA projected that Tijuana would need an additional 34 mgd 
of wastewater treatment capacity by 2023. 

A February 2008 updated analysis, also conducted by CESPT and EPA, 
found that Tijuana will need no additional treatment capacity until at 
least 2015, but could need about 17 mgd of additional capacity by 2025. 

In a March 27, 2008 letter to the Commissioner of the Mexican Section 
of the IBWC, CESPT independently updated its estimate, identifying 12 
mgd of additional treatment capacity needed in 2010, and 34 mgd needed 
by 2019. 

Costs and Timelines: In Summary: 

According to USIBWC and Bajagua, LLC estimates for their respective 
proposals: 

* the SBIWTP upgrade would cost less to construct and less to operate 
on an annual basis as well as over a 20-year operating period; 

* the Bajagua plant would be operational about 10 months before the 
SBIWTP upgrade would be operational. 

Neither proposalï¿½s estimated completion date meets the court order to 
meet CWA standards by September 30, 2008. 

Costs and Timelines: SBIWTP Upgrade Costs Less Than Bajagua Plant to 
Build and Operate: 

USIBWC estimates the U.S. federal governmentï¿½s cost to upgrade the 
SBIWTP to 25 mgd of secondary treatment capacity is $101.5 million in 
2008 dollars. 

Total O&M costs for both the primary and secondary treatment facilities 
will initially (first year)cost $16.7 million in 2008 dollars. 

* Total O&M costs include $8.4 million for primary and $8.3 million for 
secondary treatment. 

Bajagua, LLC estimates that it will cost $195.6 million in 2008 dollars 
to construct a plant with secondary treatment capacity of 59 mgd. 

Wastewater treatment services, including O&M costs (which include 
primary treatment at SBIWTP), equity and debt service, management fees, 
and profit, will initially cost the U.S. federal government $33.8 
million, in 2008 dollars. 

Bajagua, LLCï¿½s estimate is based on treatment of 34.6 mgd in the first 
year of operation. This includes 25 mgd of wastewater it will receive 
from the SBIWTP and 9.6 mgd it expects to receive from the Tijuana 
sewer system. 

As treatment needs increase over time, as Bajagua, LLC expects them to, 
costs to the U.S. federal government will also increase. 

Costs and Timelines: SBIWTP Upgradeï¿½s Total 20-year Cost Is Less Than 
Bajagua Plantï¿½s: 

The estimated cost to the U.S. federal government for construction and 
operation over a 20-year term is: 

* about $331 million for the SBIWTP upgrade, and; 
* about $539 million for the Bajagua plant. 

Both estimates are for the present value in 2008. 

Both estimates include the costs of providing primary and secondary 
treatment. This means that both estimates include the O&M costs for 
primary treatment at the SBIWTP ($121 million). 

Costs and Timelines: Other Cost Considerations: 

If Bajagua, LLC develops the capability to reclaim water from its 
plant, it has proposed that future U.S. federal government costs could 
be reduced by sharing in revenues from the sale of such reclaimed 
water. 

After 20 years, Bajagua plant ownership would transfer to Mexican 
authorities, and the U.S. federal governmentï¿½s service fee obligation 
to Bajagua, LLC would end. 

SBIWTP O&M costs would continue as an obligation of the federal 
government indefinitely, as would O&M costs for pumping primary treated 
water to the Bajagua plant if it is built. 

USIBWC is currently initiating negotiations with Mexico to increase the 
share of SBIWTP O&M costs paid by Mexico. 

Costs and Timelines: USIBWC Estimates the SBIWTP Upgrade Will Be 
Operating Jan. 2011: 

Table: 

Activity: Design; 
Timeline: January 2008 - June 2008. 

Activity: Permits and Approval; 
Timeline: April 2008 - January 2009. 

Activity: Procurement (construction); 
Timeline: June 2008 - January 2009. 

Activity: Construction; 
Timeline: January 2009 - January 2011. 

Activity: Procurement (Operations); 
Timeline: April 2010 - January 2011. 

Activity: Testing; 
Timeline: January 2011. 

[End of table] 

Costs and Timelines: USIBWCï¿½s Assumptions for Beginning Operations in 
Jan. 2011: 

Table: 

Activity: Design; 
Estimated Duration: 5 months; 
Plans/Assumptions: Engineering firm S&B Infrastructure is updating the 
original design for USIBWC, to be completed by June 24, 2008. 

Activity: Permits and Approval; 
Estimated Duration: 9 months; 
Plans/Assumptions: USIBWC estimates it will develop and issue a revised 
record of decision explaining its rationale for selecting the SBIWTP 
upgrade alternative in 3 months, and it will take an additional 6 
months to receive two permits. 

Activity: Procurement (Construction); 
Estimated Duration: 6.5 months; 
Plans/Assumptions: Time includes 1.5 months to prepare the 
solicitation, 3 months of bidding, and 2 months to award and issue 
notice to proceed. The construction contract will be awarded through 
sealed bidding. Ability to award contract assumes that Congress 
provides sufficient funding at beginning of FY 2009. 

Activity: Construction; 
Estimated Duration: 24 months; 
Plans/Assumptions: S&B Infrastructure estimates construction will take 
18-24 months. 

Activity: Procurement (Operations)
Estimated Duration: 9 months; 
Plans/Assumptions: USIBWCï¿½s estimate is based on its last solicitation 
for the SBIWTP O&M contract. O&M contract will be a negotiated 
procurement. 

Activity: Testing; 
Estimated Duration: 1 month; 
Plans/Assumptions: S&B Infrastructure estimates testing will take a 
month. 

[End of table] 

Costs and Timelines: Bajagua, LLC Estimates Its Plant Will Be Operating 
in March 2010: 

Table: 

Activity: Design; 
Timeline: May 2008 - September 2009. 

Activity: Permits and Approval; 
Timeline: January 2008 - March 2010. 

Activity: Procurement; 
Timeline: April 2008 - September 2008. 

Activity: Construction; 
Timeline: September 2008 - March 2010. 

Activity: Testing; 
Timeline: March 2010. 

[End of table] 

Costs and Timelines: Bajaguaï¿½s Assumptions for Beginning Operations in 
March 2010: 

Table: 

Activity: Design; 
Estimated Duration: 17 months; 
Plans/Assumptions: Current design is conceptual. In line with typical 
DBO contracts, contractor will complete design during procurement and 
construction phase. 

Activity: Permits and Approvals; 
Estimated Duration: 27 months; 
Plans/Assumptions: Bajagua, LLC and its DBO contractor would be 
required to obtain over 30 permits, environmental approvals, and 
concessions from both U.S. and Mexican authorities during this period. 

Activity: Procurement; 
Estimated Duration: 5 months, 1 week; 
Plans/Assumptions: Procurement phase includes the time from USIBWC 
review of the request for proposal to signing the DBO contract. 

Activity: Construction; 
Estimated Duration: 18 months; 
Plans/Assumptions: Construction will begin after procurement. 
Engineering firm RW Beck made the estimate and the three firms that 
passed the request for qualifications (RFQ) stage confirmed it. 

Activity: Testing; 
Estimated Duration: 1 month; 
Plans/Assumptions: RW Beck made the estimate and the three firms that 
passed the RFQ stage confirmed it. 

[End of table] 

Reliability Assessment: In Summary: 

Neither projectï¿½s cost and timeline estimates fully meets GAOï¿½s 
criteria for reliability. 

* The SBIWTP upgradeï¿½s cost estimate meets GAOï¿½s criteria to a greater 
extent than the Bajagua plantï¿½s cost estimate, which may make it 
somewhat more reliable than the Bajagua plantï¿½s estimate. 

* Neither timeline estimate meets GAOï¿½s criteria, although the greater 
number of uncertainties related to Bajagua, LLCï¿½s timeline reflects 
more potential risk in that schedule. 

Reliability Assessment: Criteria for Assessing the Cost Estimates: 

Certain best practices should be followed to develop accurate and 
credible cost estimates. 

* Best practices represent established, repeatable methods that result 
in quality estimates that can be easily and clearly traced, replicated, 
and updated. 

We conducted our analysis of cost estimates using GAOï¿½s Cost Assessment 
Guide (GAO-07-1134SP), which considers an estimate to be reliable if it 
is: 
* well documented; 
* comprehensive; 
* accurate, and; 
* credible. 

Reliability Assessment: SBIWTP Estimate Is Better Documented Than 
Bajaguaï¿½s: 

While neither projectï¿½s cost estimate fully meets GAOï¿½s criteria for 
being well documented, the SBIWTP upgrade estimate meets more of the 
best practices than the Bajagua estimate. 

The SBIWTP upgrade cost estimate largely meets GAOï¿½s documentation 
criteria. Specifically: 

* its purpose is clear, assumptions are well-defined and have been 
reviewed and approved by USIBWC technical staff, and it includes a 
technical baseline that comprehensively describes the project in 
detail; 

* the source data and methodologies for calculating the point cost 
estimate are clearly stated, which lends itself to replication; 

* the estimate did not provide for full traceability to source data 
(e.g., price quotes for materials) or always provide the rationale for 
using a particular methodology or source. 

The Bajagua plant cost estimate partially meets GAOï¿½s documentation 
criteria. Specifically: 

* its purpose is clear, the assumptions are generally defined, and it 
has been reviewed and approved by Bajagua, LLCï¿½s management; 

* the preliminary technical baseline describing the project is not 
detailed or comprehensive, in keeping with the DBO approach; 

* source data and methodologies for calculating the point cost estimate 
are only described in general terms, making replication potentially 
difficult; and; 

* the estimate did not provide for full traceability to source data, or 
always provide the rationale for using a particular methodology or 
source. 

Reliability Assessment: SBIWTPï¿½s Estimate Is More Comprehensive Than 
Bajaguaï¿½s: 

While neither projectï¿½s cost estimate fully meets GAOï¿½s 
comprehensiveness criteria, the SBIWTP upgrade estimate provides 
greater detail on more project elements than the Bajagua estimate. 

The SBIWTP upgrade cost estimate partially meets GAOï¿½s 
comprehensiveness criteria. Specifically, it includes: 

* a work breakdown structure defining in detail the work needed to 
produce specific elements of the project down to four levels of cost, 
and; 

* a detailed description of resources and processes needed to produce 
each component of the project, including the largest budget items that 
most impact total cost. 

We found estimates for high-level costs common to all project elements, 
but not for more detailed level costs, such as testing or procurement. 

The Bajagua plant cost estimate partially meets GAOï¿½s comprehensiveness 
criteria. Specifically, it includes: 

* a work breakdown structure generally defining the work needed to 
produce specific elements of the project down to three levels of cost, 
and; 

* a general description of the resources and processes needed to 
produce each component of the project, but did not specify the largest 
budget items that most impact total cost. 

We found estimates for many costs common to all project elements, such 
as procurement and construction management. 

Reliability Assessment: Both Cost Estimates Partially Met GAOï¿½s 
Accuracy Criteria: 

Neither projectï¿½s cost estimate fully meets GAOï¿½s accuracy criteria, 
but both have taken steps to validate the reasonableness of their 
updated estimates. 

For the SBIWTP upgrade cost estimate: 

* a consulting engineering firm checked the original design estimate 
for errors, made corrections, cross-checked the biggest budget items, 
and used the build-up method which identifies detailed level costs and 
rolls the costs up to higher levels to produce a new total cost point 
estimate. 

For the Bajagua plant cost estimate: 

* the consulting engineering firm that developed the preliminary plant 
design revised the estimate to reflect the current design status, 
updated costs to reflect current prices and rates, and used the build-
up method to produce a new total cost point estimate. 

Reliability Assessment: Both Cost Estimates Met Little of GAOï¿½s 
Credibility Criteria: 

Neither projectï¿½s cost estimate meets GAOï¿½s credibility criteria. 

The cost estimates for both projects have not: 

* been independently reviewed and verified to determine if other 
estimating methods would produce similar results; 

* varied major assumptions to determine how sensitive outcomes are to 
changes in the assumptions; and; 

* conducted risk and uncertainty analyses to determine the level of 
risk and the extent to which the actual costs may vary from the point 
estimate. 

Both estimates included a contingency factor for uncertainty (10% for 
Bajagua and 15% for SBIWTP upgrade) but neither described how or why 
this amount was selected. 

Reliability Assessment: Best Practices for Assessing the Timeline 
Estimates: 

GAOï¿½s Cost Assessment Guide (GAO-07-1134SP) includes a set of best 
practices for scheduling that focus on constructing an integrated 
network schedule, necessary components of which include that: 

* all activities are defined and sequenced, and the duration for each 
activity is estimated; 

* resources (e.g., labor, material, and overhead) are assigned to all 
activities; 

* the critical path is identified for all activities; 

* float timeï¿½the amount of time a task can slip before affecting the 
critical pathï¿½between activities is identified; 

* schedule risk analysis is conducted using statistical methods to 
determine the amount of time to reserve for contingencies; and; 

* the schedule is horizontally integrated (depicts relationships 
between different program tasks and resources needed for different 
tasks) and vertically integrated (traces the consistency of data 
between master-, intermediate-, and detailed-level tasks in the 
schedule). 

Reliability Assessment: Neither Projectï¿½s Timeline Fully Meets GAOï¿½s 
Criteria: 

While both projects have timeline estimates based on the previous 
experience of their engineering contractors, neither projectï¿½s timeline 
estimate fully meets any of the scheduling best practices. 

Since a construction contractor has not yet been assigned to either 
project, neither project has yet developed an integrated network 
schedule, which would promote efficiency and accuracy in program 
scheduling. 

Although it is early in the project development stage for both 
projects, completing a schedule risk analysis to determine the level of 
uncertainty related to different program elements would be critical in 
assessing the reliability of the projectsï¿½ timeline estimates. 

Reliability Assessment: Bajagua Plant Timeline Includes Greater 
Uncertainties: 

Since neither project has conducted a schedule risk analysis, GAO 
identified some of the potential risks facing each project that would 
typically go into such an analysis. 

GAO found that there are a greater number of uncertainties associated 
with the Bajagua plant that could affect schedule and cost. 

Reliability Assessment: Uncertainties That May Delay the SBIWTP Upgrade 
Timeline: 

Table: 

Areas of Uncertainty: USIBWC may not receive funding at the beginning 
of the fiscal year; 
Potential Impact: May delay contract award date and, subsequently, 
completion dates. 

Areas of Uncertainty: USIBWC may not receive sufficient funding; 
Potential Impact: USIBWC could not complete upgrade with current 
appropriations of $66 million. 

Areas of Uncertainty: Lawsuit may seek to force USIBWC to prepare new 
Environmental Impact Statement; 
Potential Impact: Delays upgrade if court issues injunction, which will 
depend in part on whether there is significant new environmental 
information needing analysis. 

[End of table] 

Reliability Assessment: Uncertainties That May Delay the Bajagua 
Plantï¿½s Overall Timeline: 

Table: 

Areas of Uncertainty: Over 30 permits, environmental approvals, and 
concessions from both U.S. and Mexican authorities are needed both for 
construction and operations; 
Potential Impact: Delay in any of these items would cause the timeline 
to be put on hold until the necessary permit, approval, or concession 
could be obtained. 

[End of table] 

Reliability Assessment: Uncertainties That May Delay the Bajagua 
Plantï¿½s Start of Procurement: 

Areas of Uncertainty: According to EPA, the National Environmental 
Policy Act (NEPA) requires a review of the Bajagua plantï¿½s new site 
location before the start of procurement; 
Potential Impact: Review would take a minimum of 1 month and could take 
more than a year if the site is an endangered species habitat. 

Areas of Uncertainty: The Binational technical Committee which advises 
the IBWC is concerned about the availability and location of the 34 mgd 
of additional sewage flows; 
Potential Impact: Procurement could be delayed until the issues are 
resolved. 

[End of table] 

Reliability Assessment: Uncertainties That May Delay the Bajagua 
Plantï¿½s Start of Construction: 

Table: 

Areas of Uncertainty: U.S. and Mexican Sections of the IBWC must 
negotiate a Minute (implementation agreement) before construction can 
begin; 
Potential Impact: USIBWC officials estimate that negotiation will take 
approximately 13 months from the date of issuance of this GAO report, 
which could delay construction by about 9 months. 

Areas of Uncertainty: USIBWC has concerns about the draft of its fee-
for-services agreement with Bajagua, LLC, which must be signed before 
Bajagua, LLC could sign a DBO contract; 
Potential Impact: USIBWC hopes issues can be resolved before the DBO 
contract is ready, otherwise construction would be delayed for an 
unknown period until the issues are resolved. 

Areas of Uncertainty: The location of proposed pipelines to and from 
the Bajagua plant along the Tijuana River flood control channel; 
Potential Impact: The pipeline design details may delay approval of the 
right-of-way issuance by Mexico if Mexico thinks the pipeline 
installation may pose a problem for flood control, vehicular access, or 
traffic. 

[End of table] 

Reliability Assessment: Uncertainties That May Delay the Bajagua 
Plantï¿½s Start of Operations: 

Table: 

Areas of Uncertainty: Bajagua, LLCï¿½spending application for CWA permit 
and the need for USIBWC to be named on the permit; 
Potential Impact: Failure to resolve this issue could delay or prevent 
Bajagua plant operation. 

[End of table] 

[End of enclosure III] 

Enclosure IV: Comments from the USIBWC: 

Note: GAO comments supplementing those in the report text appear at the 
end of this enclosure. 

International Boundary And Water Commission: 
United States And Mexico: 
Office Of The Commissioner: 
United States Section: 
The Commons, Building C, Suite 310: 
4171 N. Mesa Street: 
El Paso, Texas 79902: 
(915) 832-4100: 
(FAX) (915) 832-4190: 
[hyperlink, http://www.ibwc.state.gov]: 

April 16, 2008: 

Mr. David C. Maurer: 
Acting Director, Natural Resources and Environment: 
Government Accountability Office: 
441 G St., NW: 
Washington, D.C. 20548: 

Dear Mr. Maurer: 

I would like to extend my appreciation to the Government Accountability 
Office for your work evaluating alternatives for secondary treatment at 
the South Bay International Wastewater Treatment Plant (SBIWTP). The 
following comments are offered by USIBWC on the draft report we 
received from you on April 8, 2008, and we look forward to receiving 
the final report. The USIBWC generally agrees with GAO's findings, 
conclusions and recommendations given the limited scope and timeframe 
for the review of the two alternatives. I would also like to emphasize 
that the alternative for completing secondary in the United States is 
viewed as a more efficient and less expensive solution to bringing the 
SBIWTP into Clean Water Act compliance as demonstrated by the funding 
for this project in the FY 2008 Appropriations Act. 

Page 1, first sentence - Transboundary flows in canyons should be 
noted; not all flow into the U.S. enters via the Tijuana River. [See 
comment 1] 

Page 1, second sentence - Note there are unsewered areas in Tijuana in 
addition to lack of wastewater treatment capacity. [See comment 1] 

Page 1, third Sentence - Identify the U.S. Environmental Protection 
Agency as a collaborator with the U.S. and Mexican Sections of the IBWC 
in constructing the SBIWTP. [See comment 1] 

Page 1, second paragraph, first sentence and throughout document - The 
abbreviation for the United States Section, International Boundary and 
Water Commission, United States and Mexico is USIBWC. IBWC is the 
abbreviation for the Commission as a whole, which includes both U.S. 
and Mexican Sections. [See comment 1] 

Page 5, first paragraph - Regarding the statement that the Bajagua 
project will cost the U.S. federal government $32.2 million during the 
first year of operation and would be about $516 million in 2008 
dollars, the USIBWC questions the reliability of this estimate unless 
Bajagua has some data to substantiate this assertion. The Development 
Agreement entered into between the USIBWC and Bajagua identified a cost 
range of between $29-39 million dollars, which represented + /- 15% of 
$34.5 million. This figure was based on a construction cost of $178 
million. Bajagua is now estimating a construction cost of $195.6 
million. The reduced annual cost appears low in light of the fact that 
the capital cost has increased above the amount anticipated in the 
Development Agreement. USIBWC also comments that there is not certainty 
on the cost of the Bajagua project until after the Request for 
Proposals is issued and a Design Build Operate contract is awarded for 
the project. 

Page 5, first paragraph - USIBWC disagrees that the Bajagua project 
could be completed by March 2010. USIBWC internal analysis, including 
consideration of needed binational agreements, including a new IBWC 
Minute, and the general complexity and novelty of the project indicates 
at the very best, a similar time frame to the SBIWTP secondary upgrade. 

Page 12 The location maps here and on page 15 should have a scale. [See 
comment 2] 

Page 13, second paragraph - It is important to note that both USIBWC 
and EPA collaborated in NEPA document preparation and evaluation of 
treatment options. The 1994 lawsuit involved NEPA compliance for the 
plant. The treatment technology was not the subject of litigation but 
rather litigants challenged the NEPA documentation for failure to 
examine sufficient alternatives. Congress declined both the USIBWC and 
EPA's requests for funding. In the discussion of the 1999 ROD, it 
should be noted that EPA was a cooperating agency and that it was 
indeed EPA who believed that ponds were the most timely and cost-
effective option, considering the remaining funding available to EPA. 
USIBWC concurred since it was EPA that was the funding stream for the 
project; USIBWC always believed that from an engineering standpoint 
activated sludge was the more proven and better technology. [See 
comment 1] 

Page 14 - Substitute "an extended aeration process" for "aerated 
ponds". Also, change "using oxygen and microorganisms to break down 
sewage into a disposable sludge" to "the use of aerobic microorganisms 
in a biological floc to reduce the organic content of sewage. The end 
products of the activated sludge process include wastewater of 
acceptable quality for discharge and a residual biosolid requiring 
further stabilization and treatment." [See comment 1] 

Power Point Presentation Slides: 

Slide 10: It should be noted that the SBIWTP upgrade has the capacity 
for expansion up to 100 mgd. Clarify that one contractor will operate 
the SBIWTP, both advanced primary and secondary facilities. On the 
funding section, we should note that U.S. appropriations would fund the 
U.S. share of construction and operations and maintenance costs and 
that Mexico will continue to cost-share the O&M. Indicate that we are 
initiating negotiations with Mexico to increase their cost-share. [See 
comment 1] 

Slide 12: The USIBWC has not been provided data to substantiate the 
CESPT assertion that an additional 12 mgd capacity is needed in 2010; 
unless CESPT is planning to reduce sewage flows currently going to 
existing Mexican facilities. 

Slide 13: Please delete reference to IBWC on the timeframe estimate for 
the Bajagua project. USIBWC does not believe the Bajagua Project can be 
completed 10 months earlier than the SBIWTP upgrade. [See comment 1] 

Slide 14: Cost for advanced primary operations and maintenance should 
be revised to $8.4 million and cost for secondary to $8.3 million, 2008 
dollars. USIBWC current cost for O&M contract for the plant is $6.8 
million, however the cost of water, electricity and SDG&E fees is $1.6 
million. [See comment 1] 

Slide 15: Third bullet - Is there any basis for the 9.6 mgd additional 
capacity above 25 mgd proposed in the first year of operation? CESPT 
identified 12 mgd deficiency in 2010, not 9.6 mgd. [See comment 3] 

Slide 17: Third bullet--Note that Mexican financial obligations for 
IBWC treatment facilities at Nuevo Laredo and Nogales have been less 
than optimum. USIBWC expects that there will be ongoing U.S. Government 
cost participation after 20 years with the Bajagua Project because in 
the past Mexico has not developed the financial capacity to become self 
sufficient. In addition to the continued U.S. Government funding of the 
SBIWTP O&M costs, it should be noted that the U.S. Government would 
likely also be indefinitely supplementing the funding of the cost of 
pumping the advanced primary effluent from the SBIWTP to the Bajagua 
plant, since that pump station is in the U.S. and will receive power 
from a U.S. utility. [See comment 4] 

Slide 21: Clarify that the duration for permits and approvals stretches 
over the entire procurement process. Delays in any of these could delay 
construction. Also, verify that design will be conducted up to a point 
5 months before construction is completed. I am assuming that the 
schedule reflects the DBO proposals submitted before construction 
begins as part of "design". [See comment 5] 

Slide 36: A significant area of uncertainty includes negotiation of a 
new Minute by the U.S. and Mexican Sections of the IBWC, which will 
constitute final binational approval of the project design parameters 
and fee-for-services contract. In addition the Minute must be approved 
by both the U.S. and Mexican Governments before it can enter into 
force. 

Thanks for the opportunity to review the draft and provide comments. If 
you need any additional information, please call me at 915-832-4157 or 
Mr. Steve Smullen at 619-662-7600. 

Sincerely, 

Signed by: 
Carlos Marin, P.E. 
Commission: 

GAO Evaluation: 

1. Except where noted otherwise below, we made changes to the draft 
report in response to USIBWC's technical comments as appropriate. 

2. The purpose of the maps in enclosure II, pages 12 and 14 of our 
report, is to identify the general locations of the existing and 
proposed border wastewater treatment facilities. They are not 
necessarily drawn to scale. 

3. As the report indicates in enclosure III, page 29, 9.6 mgd of 
additional wastewater is Bajagua, LLC's estimate of the amount of 
wastewater it expects to receive from the Tijuana sewer system in its 
first year of operation. We did not independently assess Tijuana's 
current or future wastewater treatment needs. 

4. The USIBWC notes that it expects that there will be ongoing U.S. 
federal government cost participation in the proposed Bajagua plant 
after 20 years. Our report does not say that all costs to the U.S. 
government would end after 20 years. Rather, in enclosure III, page 31, 
we said that the U.S. government's service fee obligation to Bajagua, 
LLC would end at that time. In addition, we indicated that the O&M 
costs for the SBIWTP would continue indefinitely, including O&M costs 
for pumping primary treated water to the Bajagua plant, if it is built. 

5. Enclosure III, page 34, of the report shows that, according to 
Bajagua, LLC, its estimated time for obtaining permits and approvals 
extends over the entire procurement process and that design activities 
will be conducted up to a point 5 months before construction is 
completed. 

[End of enclosure IV] 

Enclosure V: Comments from Bajagua, LLC: 

Note: GAO comments supplementing those in the report text appear at the 
end of this enclosure. 

bajagua project, LLC: 
160 Industrial St. Suite 200: 
San Marcos, CA 92078: 
Bus. 760.471.2365: 
Fax 760.471.2383: 
[hyperlink, http://www.bajagua.com]: 

April 16, 2008: 

Mr. Steve Secrist: 
Assistant Director: 
Natural Resources & Environment: 
Government Accounting Office: 
301 Howard Street, Suite 1200: 
San Francisco, CA 94105: 

Re: Comments on GAO's Draft Report "International Boundary and Water 
Commission: Two Alternatives for Improving Wastewater Treatment at the 
United States/Mexico Border" 

Dear Mr. Secrist: 

Bajagua, LLC, respectfully provides the following comments on the draft 
GAO Report (Draft Report) referenced above. Bajagua appreciates the 
efforts of the GAO in preparing the Draft Report, but believes that any 
project-to-project comparison of the Bajagua Project and the upgrade of 
the International Wastewater Treatment Plant (IWTP) should conclude 
that the Bajagua Project is a more timely and cost-effective manner for 
the IBWC to comply with its Clean Water Act permit. [See comment 1] In 
fact, the GAO Report does conclude that the Bajagua Project could be 
constructed 10 months sooner than the IWTP upgrade. For that reason 
alone, the Bajagua Project should be selected to address the border 
sewage problem. [See comment 2] 

[See comment 1] While the Draft Report focused on timely and cost-
effective compliance with the Clean Water Act, Congress also directed 
the GAO to continue its comprehensive review of the two projects. [See 
comment 3] This directive is important because the Bajagua Project's 
ability to treat additional sewage, to provide recycled water to 
supplement diminishing supplies of water in the border region, and to 
manage wastewater treatment sludge in compliance with the Clean Water 
Act discharge permit make the Bajagua Project an even more-compelling 
choice. [See comment 4] These benefits of the Bajagua Project were 
excluded from consideration in the Draft Report, but they are critical 
to any comprehensive review. [See comment 1] 

The facts are clear. Not only would it take longer to upgrade the IWTP 
than to construct the Bajagua Project, but the cost per unit of treated 
water for the IWTP would be more expensive, the IWTP upgrade would not 
produce any recycled water, and the IWTP upgrade would not treat any 
additional untreated sewage. [See comment 5] In addition, the Draft 
Report does not include the costs to the IBWC of properly managing the 
sewage sludge currently generated at the IWTP in accordance with its 
Clean Water Act permit, a cost that will increase if the IWTP is 
upgraded. [See comment 6] 

This is another example of how the IWTP upgrade fails to address the 
larger environmental issue of managing the flow of untreated sewage 
from Tijuana into the United States. 

If the GAO takes the position that it cannot affirmatively state that 
the Bajagua Project would be the most-timely and cost-effective 
project, then the comprehensive review of the two projects directed by 
Congress should be completed. [See comment 3] Further review would be 
appropriate because the Draft Report (1) claims there are a number of 
uncertainties associated with information submitted by the IBWC and 
Bajagua, and (2) acknowledges that the GAO did not have the time to 
verify some of the information submitted. [See comment 7] Because Judge 
Moskowitz in the Federal District Court case has indicated that he will 
grant the government adequate time to make good-faith efforts to select 
the right project, GAO would have time to complete a full review of the 
two projects and to make a determination on the merits of the two 
projects. [See comment 8] 

However, if the GAO only intends to issue a final version of the Draft 
Report, there are a number of issues that it should reconsider before 
it issues a Final Report. An overview of these issues is provided below 
and in more detail in the attached comments. 

I. The Bajagua Project Is More Cost Effective Than Upgrading the IWTP: 

* Because the Bajagua Project will treat 59 million gallons per day 
(mgd), and the upgrade of the IWTP will treat only 25 mgd, a comparison 
of cost effectiveness based solely on construction and operational 
costs for 20 years is misleading because a larger project obviously 
will cost more. [See comment 9] 

* When comparing the unit total costs (capital and operational) of 
treating 1,000 gallons of sewage, the Bajagua Project has significantly 
lower costs than the IWTP upgrade, the Bajagua Project cost $1.71 
versus the IWTP upgrade cost $2.39. [See comment 5] 

* The Draft Report estimates the operational costs for a 20-year 
period, although either treatment plant will operate for longer than 20 
years. Limiting the cost analysis to 20 years is misleading because, 
after 20 years, the Bajagua facilities will be transferred to Mexico, 
and the United States will not pay for operation of those facilities. 
Conversely, the United States will continue to pay for the operation of 
the upgraded IWTP. To better assess the true costs of the two projects, 
a 40 or 50-year time frame is appropriate. [See comment 9] 

* The estimated cost in the Draft Report of operating the IWTP does not 
include the cost to the IBWC of properly managing sewage sludge 
generated at the IWTP. The sludge currently is managed in Mexico in a 
manner that directly impacts waters and beaches of the United States, 
and violates the IBWC's Clean Water Act permit. [See comment 10] 
Because an upgraded IWTP would generate even more sludge, the GAO 
Report must include the costs of properly managing that sludge to 
achieve permit compliance when it estimates operation and maintenance 
costs for the IWTP. The full costs of properly managing the sludge are 
included for the Bajagua Project. 

* The Draft Report does not consider the fact that the risk of cost 
overruns on the Bajagua Project will be borne by Bajagua, not by the 
United States. That is not the case with the IWTP upgrade. [See comment 
11] 

* The Draft Report does not consider the significant savings to the 
taxpayer from the sale of 52,000 acre feet per year (AFY) of reclaimed 
water yearly (potable water) or 66,000 AFY of secondary treated water, 
even though Section 804 of PL 106-457 and Treaty Minute 311 allow the 
United States to offset its costs with a portion of the revenue 
obtained from the sale of reclaimed water. The amount of this offset 
could be significant given that decreasing flows in the Colorado River 
and in other water sources make reclaimed water very valuable in the 
border region. [See comment 12] 

II. The Bajagua Project Is More Timely Than the IWTP Upgrade: 

* The Draft Report acknowledges that the 59 mgd Bajagua Project would 
be completed 10 months prior to the IWTP upgrade, but it downplays this 
difference by stating that the Bajagua Project includes more 
"unresolved issues than the SBIWTP upgrade." [See comment 2] That 
conclusion is not supported by the facts. [See comment 13] 

- The "over 30 permits" cited by the GAO as being needed by Bajagua are 
mainly minor permits or approvals, many of which can be obtained after 
construction begins. The three selected design, build, and operate 
(DBO) contractors all considered the time needed to obtain these 
permits when they approved the construction schedule for the Bajagua 
Project, and Mexican legal counsel confirmed that all Mexican permits 
can be obtained within the period of the proposed schedule. [See 
comment 14] 

- The federal, state, and local governments of Mexico strongly support 
the Bajagua Project, and the federal government has issued a 30-year 
concession to Bajagua for the use of federal land for the project. The 
Mexican federal government has indicated that it will issue other 
needed concessions once the Bajagua Project is approved and under 
construction. [See comment 15] 

- Bajagua is not aware of any "significant issues" that would delay the 
fee-for-services agreement that cannot be resolved with the IBWC's 
cooperation. The appropriations legislation directed the IBWC to resume 
the fee-for-services negotiations, which it unilaterally had suspended 
for a period of approximately one year. [See comment 16] 

- The issue of whether Bajagua needs a Clean Water Act permit to 
discharge from the Bajagua facilities has not been resolved, but on 
March 25, 2008, Judge Moskowitz indicated that if the project is 
delayed because the IBWC refuses to cooperate with Bajagua and the 
Regional Water Quality Control Board on the issuance of the permit he 
could direct the IBWC to "be on the permit or stop discharging." [See 
comment 17] 

* The Draft Report did not consider unresolved issues regarding the 
IWTP upgrade. 

- The IBWC allotted three months to complete the NEPA process, but the 
environmental group Surfrider has stated that it will sue the IBWC if 
it fails to reopen the NEPA process. One issue that would be raised in 
any NEPA action would be the management of sewage sludge in Mexico, 
which affects waters in the United States. It is highly unlikely that 
the NEPA process could be completed in three months. [See comment 18] 

- IBWC's decision to upgrade the IWTP using an activated sludge process 
conflicts with guidance issued by the United States Environmental 
Protection Agency (EPA) that activated sludge systems are not effective 
unless industrial discharges are controlled through a pretreatment 
program. Such an industrial pretreatment program is not in place in 
Tijuana, and therefore the effectiveness of the IWTP upgrade must be 
evaluated under NEPA. [See comment 19] 

- Upgrading the IWTP to provide secondary treatment will generate more 
sludge and, exacerbate the pollution of California beaches and near 
shore waters. This could result in a new Clean Water Act citizens' 
suit, which will cause further delays and result in additional costs. 
[See comment 10] 

- The IBWC schedule in the Draft Report does not include the time it 
will take the IBWC to obtain a Consistency Determination under the 
Coastal Zone Management Act (CZMA) from the California Coastal 
Commission. For controversial projects like the IWTP upgrade, the CZMA 
process is time consuming and can result in project denial. A recent 
CZMA hearing on a toll road proposal was attended by more than 4,000 
people, most of whom opposed the project. The project was rejected by 
the Coastal Commission. [See comment 20] 

- Whereas Bajagua's DBO contractor will be an internationally known and 
reputable construction company selected by a process approved by the 
IBWC, the contracting entities for the IWTP upgrade are not known. 
Given the IBWC's failure to complete the IWTP on schedule or within 
budget or to comply with its permit from the inception of operations of 
the IWTP in 1997, the GAO must conclude that the IBWC's track record on 
the timeliness question presents more of an unresolved issue than any 
of the concerns stated for the Bajagua Project. [See comment 21] 

If the 120 day final GAO Report is used to make a decision on the most 
timely and cost-effective project, then the Bajagua Project should be 
selected. However, if the GAO determines that additional study is 
needed to satisfy the directive of Congress to "continue its 
comprehensive review of the two proposed projects," Bajagua is 
available to assist the GAO in doing so. Again, Bajagua believes that a 
more-comprehensive review that addressed issues not included in the 
Draft Report would confirm that the Bajagua project is the best project 
to address border sewage issues. [See comment 3] 

While this letter presents an overview of these issues, the attached 
comments address GAO's specific statements in their letter to the 
Congressional Requesters, and in their PowerPoint briefing provided to 
Congressional staff. Bajagua is available to provide any additional 
information as requested. 

Sincerely, 

Signed by: 
Jim Simmons: 
Managing Member: 
Bajagua, L.L.C. 

GAO Evaluation: 

1. As stated on page 2 of the letter and enclosure III, page 22, we 
limited our work to the objectives discussed with the staff of the 
House and Senate Appropriations Committees and did not assess a number 
of related issues, including the potential benefits of the alternative 
wastewater treatment proposals. We assessed the reliability of the cost 
and timeline estimates provided by the USIBWC and Bajagua, LLC, but 
made no conclusions about which project would be more timely or cost- 
effective. 

2. Our report does not conclude that the Bajagua project could be 
constructed 10 months sooner than the South Bay International 
Wastewater Treatment Plant (SBIWTP) upgrade. On page 3 of the letter we 
present Bajagua, LLC's estimate that its plant would be operational 
about 10 months before the SBIWTP upgrade, but as noted on page 2, we 
did not independently verify this information. We also identify, on 
pages 4 and 5 of the letter and enclosure III, pages 48-51, a number of 
uncertainties that could delay the Bajagua plant's planned start of 
operations. 

3. Under our Congressional Protocols, when an explanatory statement 
directs us to report to specific committees, we work with the majority 
and minority staff of the designated committees to clarify the scope of 
work, reporting objectives, and time frames. In this case, we worked 
with the relevant staff of the Senate and House Appropriations 
Committees to arrive at the scope of work and reporting objectives 
described in the report on page 2. Although the explanatory statement 
which called for this report, accompanying the 2008 Consolidated 
Appropriations Act passed on December 26, 2007, makes reference to a 
separate on-going comprehensive GAO review, we did not have such a 
review on-going. We would consider conducting further work related to 
wastewater treatment issues in the Tijuana River basin if we received a 
Congressional request or mandate to do so. 

4. Bajagua, LLC states that its project could provide recycled water to 
supplement diminishing supplies of water in the border region. However, 
the construction plans that Bajagua, LLC submitted to us for its 
proposed wastewater treatment plant did not include plans to construct 
facilities to treat wastewater so that it can be recycled, sold, and 
reused. As our report states on page 2, we did not assess whether 
Bajagua, LLC could develop the capacity to reclaim water from its 
project at some point in the future. 

5. Bajagua, LLC states that the cost per unit of treated wastewater for 
the SBIWTP would be higher than for the Bajagua plant. We did not 
conduct such an analysis because it requires credible estimates of the 
amount of wastewater that will need to be treated by the Bajagua plant 
on an annual basis over the next 20 years, above the 25 million gallons 
per day (mgd) that will be coming from the SBIWTP. As the report notes 
on page 3 of the letter and in more detail in enclosure III, page 26, 
existing estimates vary widely on when treatment capacity over 25 mgd 
will be needed, calling into question whether the per unit cost of 
wastewater treatment can be accurately estimated. 

6. The report does not include the costs of sludge disposal because 
these costs are not borne by the USIBWC, but rather are paid for by the 
Mexican government in accordance with Treaty Minute 283. 

7. As the report states on page 2, we did not independently verify the 
cost and timeline data submitted by either Bajagua, LLC or the USIBWC. 
We did, however, assess the reliability of the cost and timeline 
estimates we received against the criteria contained in our Cost 
Assessment Guide. 

8. The decision concerning which project is the best "on the merits" is 
a policy decision for Congress and the executive branch to make by 
weighing numerous and often conflicting policy goals. We can assist the 
decision makers by providing relevant data and analysis. 

9. Our assessment of the reliability of the cost and timeline estimates 
focused on a 20-year period because that is the term of the proposed 
contract between the USIBWC and Bajagua, LLC. As the report notes in 
enclosure III, page 31, after 20 years, ownership of the Bajagua plant 
would transfer to Mexican authorities and the U.S. federal government's 
service fee obligation to Bajagua, LLC would end. However, the 
operations and maintenance costs for pumping primary treated water from 
the SBIWTP to the Bajagua plant would remain. Beyond that obligation, 
whether the United States would continue to incur additional costs 
related to the Bajagua facility, or whether the Mexican government 
would assume those costs, is not known at this time. 

10. See comment 6. As the report states on page 2, there were a number 
of issues related to wastewater treatment in the U.S.-Mexico border 
region that we did not assess, including how the Mexican government 
disposes of the sludge it receives from the SBIWTP and whether 
improperly disposed of sludge enters the Pacific Ocean and ultimately 
pollutes California's beaches. 

11. Because Bajagua, LLC does not yet have a final contract with a 
design-build-operate (DBO) contractor and a fee-for-services agreement 
between the USIBWC and Bajagua, LLC has not been finalized, we believe 
it is too soon to safely conclude that the risk of cost overruns on the 
Bajagua project will not be borne by the United States. 

12. We did not assess the extent to which the cost of the Bajagua plant 
could be offset by revenues from the sale of reclaimed water for 
several reasons. First, Bajagua, LLC did not provide us information on 
how and when it plans to construct facilities that would allow it to 
reclaim water from its plant. Second, Bajagua, LLC did not provide us 
estimates of how much it would cost to construct these facilities. 
Third, as we note in enclosure III, page 26 of the report, it is 
unclear how much wastewater the Bajagua facility would have available 
to treat and potentially reclaim. Fourth, the price that might be 
obtained for this water is not known. Fifth, the USIBWC, Bajagua, LLC, 
and the Mexican government would need to agree on the amount of revenue 
from reclaimed water sales that would go to the United States, and no 
negotiations to develop such an agreement have begun. 

13. Our report shows in enclosure III, pages 46-51, that the Bajagua 
plant's timeline is subject to more unresolved issues than the timeline 
for the SBIWTP upgrade. 

14. Bajagua, LLC characterizes its over 30 needed permits and approvals 
as "mainly minor"; nevertheless a delay in obtaining any one of them 
could delay its schedule. Delays could occur because the Bajagua 
project is logistically complex and as such will likely require 
thorough review before permit approval. Furthermore, the timing of some 
permits is dependent on the approval of others, and the permits and 
approvals will need to be obtained from governments in two countries. 

15. According to the information that Bajagua, LLC provided to us, it 
has concessions from the Mexican government for the land for its plant 
site but not for rights-of-way needed to construct the pipelines to the 
plant as noted in enclosure III, page 50. We are aware that several 
Mexican government agencies support the project, but whether Bajagua, 
LLC can ultimately meet the requirements of these agencies to obtain 
the needed concessions, permits, and approvals in a timely manner 
remains an area of uncertainty. 

16. USIBWC and Bajagua, LLC have not reached agreement on the terms of 
the fee-for-services agreement. As the report states in enclosure III, 
page 50, this is an area of uncertainty and could delay construction of 
the Bajagua plant. Our report also notes in enclosure III, page 50, 
that the USIBWC hopes that issues related to the fee-for-services 
agreement can be resolved before the DBO contract is ready. However, it 
is not unusual for negotiations to be characterized by conflicting 
views that take time to resolve. 

17. In the hearing held on March 25, 2008, Judge Moskowitz discussed 
the possibility of ordering the USIBWC to sign the National Pollutant 
Discharge Elimination System (NPDES) permit. While he suggested he 
might order such an outcome, attorneys for both the USIBWC and the 
State of California expressed reservations, and there was collective 
agreement to revisit the issue should the USIBWC decide to pursue the 
Bajagua project. Therefore, this remains an area of uncertainty. 

18. Our report acknowledges, in enclosure III, page 47, that one of the 
areas of uncertainty that could delay the SBIWTP upgrade timeline is if 
a lawsuit seeking to force the USIBWC to prepare a new environmental 
impact statement resulted in an injunction. 

19. According to an EPA Region IX official, there is no EPA guidance 
stating that activated sludge systems are not effective without 
pretreatment of industrial discharges. Moreover, the same official said 
that a pretreatment program has been in place in Tijuana since 2001. 

20. According to a California Coastal Commission official, a 
consistency determination and approval has already been granted for the 
SBIWTP to provide secondary treatment and no further review is 
anticipated. 

21. As our report states on page 2, we did not assess the extent to 
which the USIBWC managed prior projects, which includes the existing 
SBIWTP, within their estimated costs and timeframes. 

[End of enclosure V] 

Footnotes: 

[1] Building of the SBIWTP was provided for in July 1990 by an 
international agreement known as a treaty minute between the U.S. and 
Mexican Sections of the International Boundary and Water Commission. 
They are responsible for resolving water and boundary issues along the 
U.S.-Mexican border, including constructing and operating wastewater 
treatment facilities. 

[2] Bajagua, LLC is a private company. 

[3] GAO, Cost Assessment Guide: Best Practices for Estimating and 
Managing Program Costs, GAO-07-1134SP (Washington, DC: July 2, 2007). 

[4] GAO-07-1134SP. 

[5] The permit includes limits on the amount of pollution that can be 
discharged as well as monitoring requirements to ensure, among other 
things, that water quality levels are maintained. 

[6] United States Section, International Boundary and Water Commission, 
Final Supplemental Environmental Impact Statement, Clean Water Act 
Compliance at the South Bay International Wastewater Treatment Plant 
(Pasadena, CA, 2005). 

[7] Pub. L. No. 102-389, 106 Stat. 1599 (1992). 

[8] Aerated ponds treat organic wastes using natural bacteria. 

[9] Pub. L. No. 106-457, Title VIII. 

[10] Minute 311 further provides that if "agreement on an operating 
lease arrangement or design that is acceptable to both governments is 
not reached, the stipulations established in [the 1990 treaty minute] 
will apply." The 1990 treaty minute included the original conceptual 
plan for building the SBIWTP to secondary treatment capacity. 

[11] The development agreement gives Bajagua, LLC exclusive rights to 
develop the Mexican facility. 

[End of section] 

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